Assume for this question that ABC plans to finance $60 million of the acquisition by issuing 20-year
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Question:
Assume for this question that ABC plans to finance $60 million of the acquisition by issuing 20-year maturity, $1,000-par-value convertible bonds. The bonds would have an annual coupon rate of 5% and be convertible to common stock at $62.50.
| 60,000,000 | Bond Issue |
| 1,000 | par |
| 5% | coupon rate |
| 4.50% | rate of similar risk bonds |
| 2% | flotation costs |
| 62.50 | common stock |
| 43.30 | ABC pre-merger stock price |
| 68 | ABC aspirational stock price |
What would the net proceeds of the issue be if underwriting/flotation costs are 2%? (What is the formal I would use in excel?)
How many bonds would NCC need to issue? (60,000 correct?)
Expert Answer:
Given To tal Value d Bonds 60000 000 por valle of Each 000 Bond Floatation cost s ... View the full answer
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